3 Unpleasant Surprises That Impact Your Retirement

Today, we are talking about 3 unpleasant surprises that could impact your retirement. 

  • Higher Medicare Premiums
  • Unplanned expenses
  • Higher income taxes

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Surprise 1:  Higher Medicare Premiums

Let me introduce IRMAA. She was originally introduced in 2003. Her role expanded under the Affordable Care Act in 2011. IRMAA isn’t actually a person, it is an acronym. It stands for “Income-Related Monthly Adjustment Amount.”

This provision looks at your income from last year. If it exceeds certain thresholds, your premiums for both Medicare part B and Part D will be higher. The IRMAA surcharges range from $58 to almost $350 per month per person.

Surprise 2: Unplanned Expenses

Hopefully, you have a good understanding of your cash flow. But, we often find things don’t always as planned. Your air conditioner quits. You need a new roof. Healthcare expenses are more than you expect. Your kids need help.

Unplanned expenses happen. And, if the surprise is big enough, it can force you to alter your budget.  

3 unpleasant surprises - woman

Surprise 3:  Higher Taxes

When people retire, they expect their income to go down. And that should mean a smaller tax bill. But that decrease maybe wasn’t as much as you were expecting.

Here is the biggest reason this happens. Many people don’t realize part of their Social Security benefits will be taxable.

The thresholds for this tax trigger aren’t that high either. Couples with a modified adjusted gross income of more than $44,000 could see as much as 85% of their Social Security benefits taxed.

What Can Trigger These Events?

There are a few common events which could trigger these surprises.

Death of a Spouse

You are no longer using the joint tables and the income thresholds are much lower.

Required Minimum Distributions

For some, this might be an extra boost of income. But the impact could be bigger than you might expect.

Converting IRA’s to Roth IRA’s—

This can be a good estate planning strategy for you and your family. It might be even better with the new law eliminating Stretch IRA’s. But the impact could go beyond a one-time tax bill. Be sure to look at the potential impact to your medicare premiums and the taxation of your Social Security benefits.

Talk to a Trusted Advisor

Life is full of surprises and things rarely go exactly as we plan. You may not be able to avoid these traps, but you can be better prepared to deal with them. If you have any questions, be sure to speak to a trusted advisor.

What's On Your Mind?

Do you have a question about what’s happening in the world of finance or investing?  Is there a topic that has you curious?  We’d love to hear from  you.

 We’ll do our best to answer it in a future episode.  To submit your question, fill out the form.  If you prefer, you can send us an email directly.  That email address is neal@flemingwatson.com

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About the Author

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors  He typically works with people who are planning for retirement.  Fleming Watson is a Registered Investment Advisory firm located in Marietta Ohio.  Our firm primarily serves Marietta, Parkersburg, Williamstown, St. Marys, Belpre, Vienna and the surrounding communities in Washington and Noble Counties in Ohio and Wood and Pleasants county in West Virginia.

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